EU lifts block on games tax breaks

French and British games studios can again apply for videogame tax breaks based on the cultural test, following a landmark decision by the European Commission.

France’s 20 per cent tax credit policy expired in January and left EU members without a clear and tested route to the state aid.

While games tax breaks themselves have been banned across the EU, the ‘cultural test’ that studios used to apply for them was no longer applicable.

That in turn meant EU states would need approval on games tax breaks through other method; one which would be untested, uncertain and likely subject to a protracted approval process.

But the European Commission has now given the cultural test the all clear for another five-year period. It will expire again in 2018.

The new ruling has a significant impact on the UK’s games industry, which is currently working with the Culture department to establish a framework for its own tax relief policy.

State aid, by definition, is banned across the European Union. But the ‘cultural test’ allows certain games studios to argue that their project is of national and cultural significance, and thus would be exempt from any such ban.

The European Commission’s latest decision will likely force the hand of Britain's Department for Culture, Media and Sport to apply for games tax breaks based on this cultural test.

In March, the UK government announced it would implement games tax breaks in a dramatic political volte-face that shocked and delighted many games developers across the country.

Some £15 million will be spent on UK tax breaks in the financial year 2013-14, with another £35 million budgeted for the following year.

'Critical victory'

“I welcome this important resolution for our industry,” said Guillaume de Fondaumiere, a director at Paris studio Quantic Dream and chairman of the European Games Developer Federation.

“This will allow France to pursue a scheme that has proven very successful, in particular to relocate creative forces that had left the country.

“But more importantly for Europe as a whole, I hope that this extended window will now encourage other countries such as the United Kingdom to quickly put in place similar measures.

“Through this decision, the Commission has also confirmed the legitimacy of games as a form of cultural expression, putting video games on equal footing with films or books.”

Richard Wilson, CEO of UK games trade association Tiga, said the move was a “critical victory” for Britain.

“Together we have demonstrated that video games are economically important, can be educational, and can be cultural products.”